COLAs Boost HSA, Saver's Credit Limits

November 10, 2006 (PLANSPONSOR.com) - Cost-of-living
adjustments will mean higher contribution limits for health
savings accounts, and a boost in the saver's credit next
year, according to the Internal Revenue Service
(IRS).

The HSA catch-up contribution limit (for individuals who
are 55 or older) will be $800 in 2007, a $100 increase from
2006.
The required minimum annual HDHP deductible will be $1,100
for self-only HDHP coverage (a $50 increase from 2006) and
$2,200 for family HDHP coverage (a $100 increase from this
year’s level).

Additionally, the so-called Saver’s Tax Credit,
which applies to certain low-income individuals who
contribute to a 401(k) plan, (or certain other qualified
retirement plans or IRAs) – given a new lease on life by
the removal of EGTRRA’s sunset provision in the Pension
Protection Act of 2006 (see
What’s Inside the Pension Protection Act
), will next year be applied to higher income levels.

In 2007, the tax credit applies to individuals with
adjusted gross income not exceeding:

$52,000 (for those married filing jointly, a $2,000
increase from the 2006 level),

$39,000 (for head of household, a $1,500 increase),
or

$26,000 (for all others, such as single or married
filing separately, which will be a $1,000 increase).

In addition to the removal of the EGTRRA sunset
provisions, these amounts first became subject to annual
cost-of-living adjustments next year as a result of the
Pension Protection Act of 2006.

Additionally, the IRS updated the limits relevant to
Dependent Care Assistance Programs (DCAPs), as well as the
Adoption Assistance Program/Adoption Credit ($11,390 for
2007, a $430 increase from this year’s).
The exclusion will begin to be phased out for individuals
with modified adjusted gross income greater than $170,820
and will be phased out entirely for individuals with
modified adjusted gross income of $210,820 or more.

For 2007, the Revenue Procedure also says that the
monthly limit on the amount that may be excluded from an
employee’s income will be $215 for qualified parking
benefits, and $110 for transit and vanpooling expenses
combined, a $10 and $5 increase from the 2006 limits,
respectively.